SCOTUS asks tough questions on hospitals’ Medicare claims lawsuit

A majority of Supreme Court justices on Tuesday sounded skeptical of a suit brought by hospitals to reopen Medicare claims as much as 25 years old because of calculations that were found to have underpaid them.

The justices heard oral arguments Tuesday in the case of Sebelius v. Auburn Regional Medical Center, a challenge brought by 18 hospitals that are seeking compensation from claims dating to 1987. The hospitals say their reimbursements fell short because the Department of Health and Human Services used a faulty method for calculating Disproportionate Share Hospital payments — money that goes to hospitals that treat a large number of low-income patients.

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More than 6,000 hospitals participate in Medicare and most receive DSH payments, meaning potentially billions of dollars in payments and administrative costs could be at stake in the outcome.

At issue is whether HHS has the ability to set a firm time limit for appealing claims to the Provider Reimbursement Board, an HHS entity that handles such disputes.

By statute, the appeals have to be filed 180 days after being notified of a payment. But HHS also provides an exception that gives the HHS secretary up to three years to reopen an appeal for “good cause,” which Deputy Solicitor General Edwin Kneedler told the justices was “something akin to an act of God” that prevented providers from filing a timely appeal.

Kneedler, who spoke first, insisted that HHS had authority to enforce the absolute statutory deadline. But he also argued — somewhat less urgently — that it also had the leeway to authorize the three-year exception.

He said the “need for finality” required that even if the incorrect payment resulted from intentional fraud on the agency’s part — which he denied was the case — the deadline had to stand.

But the attorney for the hospitals, Robert Roth, argued that HHS did not have the authority to set a hard-and-fast cutoff. Surely, he said, an “agency cannot shield itself from judicial review of its own misconduct.” He alleged that the DSH payments, which a federal D.C. District judge ruled were flawed in 2008, were the result of “intentional concealment” and “deliberate misconduct.”